8 Common Reasons for Small Business Failure
“I have not failed. I’ve just found 10,000 ways that won’t work.”
The risk of failure is part and parcel to starting a small business venture.
The elements that will lead to that failure can come from external sources but, more often than not, it’s the internal factors that speed up the process.
As easy as it can be to shift the blame for the failure to everyone and everything else, many of the pitfalls that a small business can fall into will be the product of core activities.
Everyone loves a good statistic (right?) so let’s break some of the reasons a small business can fail and see how much you can remedy from the inside.
32.1% of small business fail because of mismanaged financial activities.
Insufficient funding, losing track of your receivables and payables and other related issues can cause any business to crumble.
This isn’t the ‘exciting’ part of the business, so it can fall to the wayside if it doesn’t get the attention it definitely requires.
But, taking accountability for the boring stuff can pay off in the long run.
2. 14.6% of small businesses fail due to inexperienced or incompetent management.
You can be the most accomplished plumber, florist, manicurist, architect (etc.) on the planet but without management skills, the ship can still sink.
The technical side of a business needs proficient management to reach its potential.
3. 12.4% of small businesses fail due to inflation and economic conditions.
Sometimes the failure will be out of your hands. The actions of your government and other global financial mechanisms will fluctuate in ways that aren’t often in your favour.
It’s hard to safeguard against the impact of natural disasters etc. but it’s a risk you should be aware of as a small business owner.
4. 12.3% of small businesses fail as a result of poor book and record keeping.
The act of keeping really detailed and accurate records is one a lot of people don’t enjoy.
Avoiding it may cause short-term relief, but the long-term repercussions of not keeping up with your books can send a business into the ground.
Also, please, please, please (x∞) back up your books if you have them on your computer. Please.
5. 10.7% of small businesses fail due to issues with sales and marketing.
If you aren’t personally au fait with the sales and marketing sphere, or have someone in your team who is, it can seem daunting to introduce to your business.
It can be far too easy to throw money at it without knowing what really works for your brand. Understanding marketing, even the basics, can save you time and money and maximise return. (Check out our marketing strategy course here.)
6. 9% of small businesses fail due to staffing problems.
Staff can be the best and worst parts of a business.
Finding a balance between the expectations you place upon your staff and they expectations they will have for you is tricky, but worth it.
7. 2.7% of small businesses fail due to failure to use external advice.
This might seem like a very small percentage, but the risk is still present.
Always thinking that you know best in every situation can lead to disaster. There’s absolutely no shame in taking the advice of others when they offer it, or seeking it out yourself.
Experts are experts for a reason, and enlisting an external expert can push you over a business bump that you might not be able to get over alone.
8. 6.2% of small businesses fail due to union problems.
Depending on the union that is taking action, your business can suffer in the upheaval.
The unions themselves aren’t the root of all evil, but they can make things more difficult.
So, how much is outside of your control?
The only ones on this list that you have no say over, inflation and economic conditions at 12.4% and union problems at 6.2%, comprise just 18.6% of small business failure.
18.6%! Out of 100%! Which means that the 81.4% chance of failure is for reasons that you have a say over!
YOU and your team can change the outcome.
Take the opportunity for success into your own hands. Create an action plan.
Look at each of the possible problems we’ve mentioned: is your business at risk of any of them?
Try not to be too proud to admit if it is - small businesses will have growing pains, and it’s the job of management to iron them out.
